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Riot Platforms Falls After the Bitcoin Miner Is Targeted by Short-Seller Kerrisdale

Jun 4, 2024

As a seasoned crypto investor with a keen eye for market trends and company fundamentals, I find Kerrisdale Capital’s recent actions against Riot Platforms (RIOT) both intriguing and concerning. While it is true that the miner’s business model has been under scrutiny due to its cash burn and reliance on at-the-market (ATM) funding, I also believe that short-selling a stock based on such accusations requires careful consideration.

Riot Platforms, a Bitcoin mining company represented by the ticker symbol RIOT, experienced subpar performance compared to its industry peers on Wednesday. This underperformance was prompted by disclosures from prominent short-seller Kerrisdale Capital, which revealed it holds short positions in RIOT stock while being long on Bitcoin (BTC).

Kerrisdale criticized the miner for squandering cash and exploiting retail shareholders using its at-the-market (ATM) financing approach.
As an analyst, I would rephrase that statement as follows: “In alignment with many other US-listed mining companies, Riot’s business model operates like a never-ending treadmill of cash expenditures, leading us to label this dynamic as financially unsustainable. To keep the wheels turning, Riot continuously issues new shares to retail investors, acting much like an automated teller machine (ATM) draining funds. Despite Bitcoin reaching record highs following its halving event, Riot’s mining operations remain unprofitable.”
The short-seller also noted it’s holding bitcoin (BTC) as a hedge against shorting the miner.
As a researcher studying the cryptocurrency market, I observed that Riot’s stock prices took a significant hit on Wednesday, with a loss of approximately 6%. Conversely, Bitcoin (BTC) experienced growth during the same period. Unfortunately, my attempt to reach out to Riot for commentary on this development was unsuccessful as I didn’t receive a response at the time.

I, as an analyst, would put it this way: Just a week ago, I observed Riot initiating a hostile takeover of Bitfarms (BITF) by acquiring a significant stake, amounting to 9.25%, making them a major shareholder in the company.

Kerrisdale isn’t new to taking aim at stocks related to cryptocurrencies. On March 28th, they announced their decision to sell short Michael Saylor’s MicroStrategy (MSTR), arguing an excessive valuation. The revelation caused MSTR shares to dip but has since regained some ground. Nevertheless, the stock is approximately 14% below its pre-short report value.

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2024-06-05 17:43